Britons are being warned of fraudulent ‘pension schemes’ which could see them lose all of their retirement savings. It is believed upwards of 1.3 million people have been the target of fishy financial advisors who have given bad pensions advice, potentially leading to dire consequences.
This has resulted in many people losing most or all of the pension savings they have spent decades building up to support their retirement.
People have often been encouraged to transfer their current private pensions or defined benefit pensions to a Self Invested Personal Plan (SIPP) under fraudsters’ advice and ultimately put money into investments which are unregulated, high risk and illiquid.
In some of the worst cases, pension pots of more than £500,000 have been moved into worthless investments after being convinced by financial advisors who are not authorised or regulated by the Financial Conduct Authority (FCA).
To help fight against pension scams, new regulations came into force last week in an attempt to protect people from pension fraud.
Under the new regulations, where the operators of a pension scheme have concerns over a request to transfer funds, they can refer their members to the Money and Pension Service (MaPS) for guidance.
In cases where clear red flags are raised, they are able to refuse a transfer altogether.
Prior to this, the scheme could not refuse a transfer, even if there were clear red flags, if the customer was seen to have a statutory right to make the transfer.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown commented on the impact of the new regulations.
She said: “For too long scammers have been able to plunder people’s hard earned retirement savings and get away with it.
“These new regulations offer a safety net against scammers but it’s important people understand what these regulations are and what they are designed to do.
“Most pension transfers go through with no problem and this should continue to be the case, but you may find your provider needs to ask you some questions before signing off on the transfer.
“For instance, you may be asked questions about where the pension is to be transferred to and how you were contacted.
“If the pension provider thinks a transfer is suspicious, they can refer you to the Money and Pensions Service for guidance to help you make an informed decision. In the case of clear red flags, the transfer can be stopped.
Hargreaves Lansdown also offered some advice on what people can do to protect themselves:
“Don’t be scared to cut off contact. If you feel under pressure, then you can put the phone down or delete the email.
“Check the FCA register. The FCA authorises most financial service firms in the UK. If the company contacting you isn’t authorised, it could be a scam. You can check the Financial Services Register to see if a firm or individual is authorised or registered.
“If you’ve been defrauded or experienced cybercrime you should report it to Action Fraud either online or by calling 0300 123 2040.
“If you’ve started a pension transfer and now suspect a scam, call your pension provider straight away. They might be able to stop it.”